Regional ownership and europeanization from without

‘Regional ownership’ and the limits of Europeanization ‘from without’: A political economy approach of regional cooperation in South Eastern Europe

XHENSILA GABA

Senior Project/ Bachelor level Empire State College/UNYT

Instructor: Ilir Kalemaj, PhD Spring 2013

Abstract Although South East European countries have all expressed their willingness and commitment in joining EU and becoming an integral part of the European Architecture, the region is still struggling through slow development and heterogeneity among countries in their integration stages on one hand, and demanding requirements from the EU level together with a discontinuous and constantly changing European approach on the other one. Given this context, it is necessary to re-address the developmental strategies for SEE. In this paper, I review the literature of two major perspectives for the region: the European and regional approach, as well as the process of integration and cooperation as two concepts incorrectly interchanged with one another. The debate is whether these two perspectives are competing or complementary to each other, and moreover, whether the regional approach is feasible given the peculiar context of SEE. I argue that regional approach or regionalism is a more appropriate developmental model for the countries of SEE by pursuing a political economy analysis. First, I argue why Europeanization ‘from outside’ has faced limitations in the region, and second I evaluate the concept of ‘regional ownership’.

Some of the arguments are (1) a better use of the synergies within the region, (2) a larger economic market that would lead to higher demand, production and investment (local or foreign), (3) the need of the region to specialize in comparative-advantage-owning products and to trade with symmetric partners (EU-SEE is asymmetrical and favors the developed partner according to trade theory), (4) deeper regional integration will ease the path towards the common goal: joining EU, since convergence will derive from within and not from external conditionality. The methodology I pursue is a qualitative deductive approach through critically

analyzing the existing literature and re-evaluating the two perspectives for the region under the logic of political economy theory.

Structure of the paper

I.

Introduction

II.

Literature review a. European approach vs. regional approach b. Reviewing Europeanization

III.

Research questions and purpose of the study

IV.

Thesis paragraph

V.

Methodology

VI.

Body paragraphs a. The limits of Europeanization ‘from without’ in SEE b. The political economy of the SEE region c. The convergence of regionalism with European Union perspective -lessons learnt and prospects for the future

VII.

Concluding remarks

Introduction Where is South Eastern Europe (SEE) heading towards? There is a straightforward answer to that question: towards joining an enlarged European Union. Yet, the difficult and challenging question that follows is: how? What should be the most appropriate developmental path that would facilitate the membership of SEE into Europe? Despite their articulated willingness and commitment in joining EU, still the region is fragmented and heterogeneous with countries at different levels of integration and constrained by a slow and discontinuous process of accession. After the post-communist period, South Eastern European countries have faced multiple challenges in their transitology and modernization, with significant differences from the Central Eastern European Countries (CEECs). The violent dissolution of Yugoslavia, the ethnic wars that followed and a delayed, perplexed transition are all features that depict what most of the post-communist scholarly debates have called a ‘Balkanized’ transition process (although later the term was dismissed due to a pejorative connotation) (Monastiriotis, 2008). On one hand, there was the challenge of democratization and consolidation of the countries followed by the process of economic restructuring towards capitalist, service-based system. On the other hand, the whole process of transition had to be in compliance with the European standards. Given this peculiar context, the European perspective and the Europeanization of SEE would adjust to ‘South East European style’ (Anastasakis, 2005).

First, the process of Europeanization was taking place “from without” which means that EU applied the conditionality principle beyond its pre-accession goal, but rather as an instrument to spread democratic values and a common European identity to ‘outside” states (non-members)

(Djordjevic, 2008). Second, the region of SEE was not treated ‘en bloc’ with regard to accession and integration, as happened to the CEECs with the 2004 Eastern enlargement. This contributed to a fragmented and heterogeneous region. Third, the EU approach has been instable and constantly changing over years, which means that EU did not have a carefully designed approach to address the problems of the region in the long run. At first in the 1990s, there was a gradual deepening of EU’s influence in the region, culminating in a point of saturation, and later followed by a distancing of EU and currently the emergence of a new concept: ‘regional ownership’ (Bechev, 2006). With the establishment of Regional Cooperation Council (RCC), that was designed to substitute the Stability Pact for SEE, the regional approach, as one of the important developmental path for SEE, emerged with new perspectives and envisioning of the region and regionalism (Monastiriotis, 2008).

The struggling process of SEE countries to become members of EU, a process of forward as well as backward steps at times, has demonstrated for some limitations of Europeanization.

The fate of the region is closely linked to EU, however, what if the sticks and carrots of EU cease to exist? What would be the future of the region? Thus, the focus of the recent debates is not merely focused on Europeanization, but rather on the regional approach in SEE. However, it is important to emphasize that one perspective is not the antithesis of the other, which means that they don’t necessarily contradict each other. The scope of this paper is not to question or doubt the final destination of Southeast Europe in becoming part of the European architecture, but rather to research and re-address the most adequate developmental path that would help SEE to get at the ‘end of the tunnel’ faster and ‘safer’. Following, a review of the literature and existing perspectives will provide with a theoretical background.

Literature review

There are two major approaches that explain the developmental strategies/paths for the region of South East Europe. On one side of the theoretical spectrum stands the European integration approach and on the other one the regional approach or regionalism. These alternatives are presented either as competitive or complementary to each other. Before assessing and analyzing each approach, it is important to define and understand the process of integration and the process of cooperation, as they are incorrectly interchanged with each other. Cooperation is mainly about policy coordination and information exchange as an effort to harmonize policy and ideas, whereas the process of integration includes something deeper and more organic (Monastiritios, 2008). The two concepts, cooperation and integration, are building blocks in the both approaches, the European and the regional one. However, their meaning within the theoretical framework of each perspective changes and implies different future policies with regard to developmental strategy of the region.

When addressing concerns with regard to the road of SEE towards Europe, there is a deficiency in separating between (1) where the processes take place and (2) under which perspective they are being evaluated. The first step is to start by the broad theoretical perspective (European or regional) and second to analyze the processes of integration and cooperation according to each perspective (processes pertain to both approaches, although authors as Rosamond and Radaelli (2000) argue them as being competitive and exclusive).

First, the European perspective means the region moving towards Europe or becoming progressively more an integral part of Europe. According to this perspective, the regional cooperation is merely a tool for European accession: the countries within the region have to cooperate with each other because this is imposed by the conditionality of the European Union.

The European perspective was considered as the potentially most successful strategy when

contrasted with the disadvantages of the earlier short-term and uncoordinated models towards the region. Rosamond (2000) is one of the main authors extensively writing about the theories of European integration and its implications in different actors. However, this perspective has not been flawless since it did not generate the desired outcome of an ‘en bloc’ membership of the region. Moreover, Europeanization process ‘from without’, which means extending European values in the non-member states, has had its limitations in the region due to the asymmetrical relation between the norm-maker (EU, advantageous position, the process is top-down, externally driven) and the norm-taker (SEE, outside actor, it cannot influence through its feedback on the norm-maker).

On the other hand, the regional perspective views cooperation completely different. The regional cooperation is a strategy and opportunity for the countries within the region to exchange policy ideas and information in order to establish a sustainable restructuring of their internal economies and later, due to spillover effects, it may enter into a sustainable development path that will lead to economic convergence with other developed EU countries. Scholars such as Demekes (2005), Bechev( 2006), Thielemann (2002) or Geogakopoulos (2011) have been quite critic with regard to Europeanization and have supported regionalism through various arguments, be them political or economic ones. The regional approach takes an inward focus towards the region itself and the suggested strategy is that of strengthening regional integration as a tool for internalizing and managing the regional economic sphere-thus the countries of SEE have to be the patrons of their own future. EU is depicted as a key actor of a wider context, although not the only one (globalization and global influences are taken into account as well). The goal of the regional approach is to integrate the region into one single economic entity (one market), and

cooperation becomes the only instrument for an effective institutional and policy framework that would support the development of the region.

The issue of regionalism is addressed directly or indirectly, encompassing economic analyses of trade and foreign direct investment, political economic analyses of regional cooperation, and policy analyses of certain processes. Despite some significant satisfactory steps towards policy coordination, still much remains to be done in the region and the major responsibility falls on the national policy-makers. Although the product market has experienced some very deep liberalization, still intra-regional trade relations are low judged both in absolute and relative terms (Geogakopoulus, et al, 1994). The EU is by far the most important trade partner for all SEE countries. Also there is no intra-regional FDI in the region. Regarding the labor market, there is no integration process and hardly any prospective attempt. This market suffers the most of immobility. The financial sector is the only area where market developments stimulate processes of policy coordination, yet it is not effective enough to lead to other marketdriven impacts. As it has been extensively discussed in the literature, SEE regional cooperation has been a case of imported regionalism imposed by EU conditionality and closely attached to European ‘carrots and sticks’. This is the case with trade integration in the region; the official establishment of SEEFTA was only possible after the bilateral agreements had been completed, all under the strong encouragement and guidance of the EU (Bjelic, 2005).

Research questions (1) How do the two different (although not antithesis) policy approaches (European and regional approach) impact on the developmental path of the region?

Sub-questions:

(a) Why regional approach provides a better option according to the political economy theory? (b) Why Europeanization has inhibited regionalism in SEE?

Thesis paragraph In this paper, I argue that the fragmented, top-down, externally-driven Europeanization process has met limitations in SEE due to its peculiarity, and that the regional approach should take prevalence in the region since this approach reinforces the region both politically and economically (political economy approach of cooperation). Moreover, I argue that regionalism is not necessarily an antithesis of European approach, rather a developmental strategy for the balancing out of regional long-term sustainability with the final goal: Europeanization.

Methodology The study will be conducted through a qualitative deductive approach by critically analyzing the existing literature on Europeanization, regionalism and political economy theory. The main focus will be in comparing and contrasting the two main developmental approaches to South Eastern Europe: the European approach and the region approach. Thus, the main dependent variable in this study is the political economic analysis of SEE and the independent variables are the two main approaches, with the aim in studying their impact as developmental strategies for the region. Moreover, the relation between the independent variables will be analyzed: whether the regional approach is complementary or contradictory to European approach. However, the relation between the two independent variables is not an issue per se, but the analysis will be beneficial in understanding the future prospects of SEE under each approach.

I.

The limits of Europeanization ‘from without’ in South Eastern Europe

The enlargement wave for South Eastern Europe has failed and in the absence of a specified time framework for the full integration of the region, time is ripe to review the transformative power of Europe and the limits of external Europeanization or the Europeanization ‘from without’. The Europeanization process in SEE has not been that powerful or significant as it has been in the case of EU member states. One reason is that the transformative power of EU diminishes when there is a decreasing state capacity and degree of democracy (Anastasakis, 2005). First, let’s briefly define what Europeanization is and what does the term ‘from without’ mean. Radaelli (2000) defines Europeanization as ‘process of creating, diffusing, and implementing the formal and informal rules, policy patterns, values, and norms which are first defined and consolidated in the EU level and then incorporated into the domain of domestic discourse and structure. At first, Europeanization was coined as a term to describe the impact of the processes on member states, thus any change occurring inside the European Community itself.

With the collapse of communism, Europeanization expanded conceptually by increasingly associating with the enlargement of the EU to the East. Europeanization of the East is linked with the democratization process, restructuring towards market economy and adaptation of the advanced models of the West. For the Balkans, Europeanization means internal regulation based on advanced western models as well as stability and prosperity for the future. Yet, for postcommunist countries still recovering from violent ethnic wars, this process has been more traumatic and struggling (Moga & Onu, 2011). The common denominator for Europeanization in SEE is that of a process externally-driven and increasingly demanding. Europeanization ‘from

without’ consist in spreading shared European democratic beliefs and values to the states that will join EU in the future (Djordjevic, 2008).

Political conditionality was used as a tool to generate domestic reforms of institutions, structures and policies in compliance with EU requirements. Despite the term ‘partnership’, in reality the relation EU-SEE is a one-direction, instructive and patronizing process. Moreover, EU differentiated the countries in the region, with Bulgaria and Romania on one hand, and the Western Balkans on the other, based on their capacity to accomplish the criteria. The establishment of bilateral relations with SEE countries, rather than multilateral ones, contradicts the support of regional cooperation, by making of it only a political rhetoric. It is unclear whether EU is more willing to re-enforce existing regional strategies such as the Stability Pact or to encourage bilateral negotiations with those states that are relatively better endorsed to meet its conditions. EU has been the main actor in SEE to promote political and economic reform such as democratization, liberalization of markets etc. however; the Europeanization process has failed to be fully absorbed by the region, because of the lack of absorbing institutional capacity of the ‘outside states’ (Barlett &Samardzija, 2000). One disadvantage of this perspective is the opportunity cost of adjusting to a very advanced institutional and policy framework, often beyond the capabilities of the region. Thus, the main disadvantage of this process (as a consequence partially of the first disadvantage) is the diversion from the objective of regional cooperation and integration.

The maintenance of bilateral approach both through its trade or association agreements has increased the fragmentation of the region and has inhibited any potential for regional ownership, or the creation of a Balkan economic space. Moreover, criticism about the EU impact are coming from trade theory, as for example the implications of developing adverse specializations in the

production of the region; the asymmetric role of trade costs for countries with diverse price elasticity of effective demand and theoretical remarks that focus on trade integration between unequal and distant partners (Geogakopoulos et al, 1994).

II.

A political economy approach of Regionalism

In this section, the regional perspective is evaluated twofold: (1) does the regionalism of SEE make sense politically, and (2) does it make sense economically? The countries of the region share a common historical past and they are heading to the same future trajectory: through a similar road (Europeanization) towards the same end (enlarged EU). Thus, even through a geopolitical level of analysis, there exist potential synergies within the region which need to be incorporated as variables in the developmental strategy. Political theory also offers strong arguments to sustain collaboration in the Balkan context. Political cooperation is the primary step to secure political stability and security, which are both essential factors for economic development, be that externally or internally-driven (Rosamond, 2000). The speed of economic and political development increases through internal cooperation, for example processes of policy learning, policy spillover and converging policy options. Moreover, regional cooperation contributed in avoiding inter-state competition, one of the concerns articulated at the EU level.

The regional approach makes more sense economically speaking. The creation of a large market would lead to a higher effective demand and thus make the region more attractive for large international businesses and other investors (FDI) (Demekes et al, 2005). Economies of scale are more easily exploited with increased productivity and innovation, and regional crisis are easily addressed and resolved within a region rather than in a wide and diversified European

market. Trade theory supports regionalism instead of asymmetric relations such as EU (developed partner) and less developed partners that are constrained to specialize in products with no comparative advantage, and thus resulting in adverse impacts at the long-run, as for example the Greek case. The region can be competitive in a globalized world even without the scheme of EU by specializing in products in which they have a comparative advantage. Under policy harmonization, the region can attract more FDI, by increasing the interaction between financial markets and labor markets, which are much underdeveloped.

The economic disadvantaged position of the region is mainly the outcome of an underdeveloped political economy which puts a burden on the ability of national actors to support regional reform and integration. This also impedes the absorption of Europeanization, by creating a twofold problem, in the national and European level.

III.

The convergence of regionalism with EU perspective: Lessons learnt from SEE

As mentioned in the literature review, there is a debate either regionalism competes with Europeanization or it is complementary. However, in this essay, the scope is not to question the final destination of SEE towards EU, but rather to understand which is the most adequate policy approach for the region, both politically and economically. In this point of view, both perspectives converge. The establishment of the Regional Cooperation Council clearly demonstrates for an intentional shift from EU in the favor of regionalism. The transformation of the SPSEE and the establishment of the RCC in 2008 can reasonably be seen as an effort, at least theoretically speaking, to institutionalize regional cooperation without any ‘carrots and sticks’ (Bechev, 2006). The ‘EU distancing’ presents both a challenge and an opportunity for Southeast Europe. A challenge as it addresses the question how to cooperate without the negative or

positive incentive of EU. But also an opportunity to define what is it that the region needs and represents and what is the scope of regional integration among the countries of the region. SEE have a real opportunity to decide upon their agenda for cooperation and regional ownership, but together with opportunity and freedom comes a higher degree of responsibility for the region to take an inward view of itself and evaluate any potential for taking advantage of regional ownership. The region has the chance to develop internally and promote a good image of it externally.

On the other hand, regionalism comes with its own costs which need to be carefully evaluated as well along with the benefits. There is the realist and pragmatic argument that the region does not own so far the capability to create the ‘critical mass’ necessary for its own regional development (Thielemann, 2002). The region still lingers from unrecovered psychological traumas of the violent dissolution of Yugoslavia, which inhibits any deeper integration. Moreover, the region is highly dependent on external aid, and any attempt to become regionally self-sustainable would require time and much effort. The lack of a regional leader and the underdeveloped of the four markets (product, labor, financial, services), limits any policy harmonization or exchanging of ideas between actors, because the internal economic interests are almost significant. These issues pose challenges in fully making benefits from the political economy theory, which favors regionalism in the case of SEE. Concluding remarks As a conclusion, South Eastern Europe needs to review its developmental path towards joining the European Union. Both the European perspective and the regional perspective are complementary to each other, in the sense that by adopting a regional approach, the SEE

countries only change their strategy, but not their final ambition to become members of EU. Both perspectives appear to have advantages as well as costs. However, the regional approach comes to be a preferable option and somehow necessary to counter-balance the process of European integration. The political economy theory involves for deeper regional integration, and not simply cooperation as a response of the ‘carrots-sticks’ of EU. The limits of Europeanization ‘from without’ and the delayed integration for most of SEE countries suggest the review of the strategic patterns in the region. With the establishment of Regional Cooperation Council, it appears that EU is distancing from the region by ‘relaxing’ most of its demanding conditionality and providing the region with the opportunity to ‘regional ownership’. Of course, problems emanating from within the region make this option quite problematic. The absence of a regional leader, unresolved ethnic tensions, the countries being economically dependable to EU, institutional weaknesses are some of the problems that put a burden on the regional approach.

However, despite these issues, the region has a potential to develop large economic markets and be globally competitive through trade and specialization in products in which it owns a comparative advantage. Moreover, a more integrated region would attract intra-investments (between the countries of the region) and FDI (foreign investors). Instead of bilateral agreements with EU which leave the region more fragmented and heterogeneous in their integration and association processes, an integrated region that exploits the internal synergies will easily converge with the EU standards.

Despite the crucial and essential role of EU in development of the region, it is important to keep an eye open with regard to any new or potential opportunities that the region is being offered (whether intentionally or unintentionally), with the main objective to fasten and improve

the developmental path of South Eastern European countries, so that they do not remain the last to ‘catch the train’ to Europe for long.

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